Croydon In Crisis: Council handed biggest bail-out ever

EXCLUSIVE: Councillors were being briefed tonight that the government has agreed to a £120m loan arrangement for the bankrupt borough – but it will take at least 20 years for the council to pay down its mountain of debt.

Croydon Council has been granted a couple of years’ breathing space

Croydon should be able to go ahead and set its budget on Monday, after the Ministry for Housing, Communities and Local Government today issued an 11th-hour agreement to allow the bankrupt council to borrow £70million this financial year and another £50million in 2021-2022 to fix its financial mess.

At £120million, Croydon’s bail-out is the largest settlement for a local authority in British history.

In December, Croydon submitted a request to MHCLG for a £150million capitalisation direction over three years. The government’s decision reduces that amount, and is over just two years. It also comes with a series of strings attached and warnings of dire consequences if the council does not improve its financial management and governance.

It will also see Croydon residents paying off the new borrowing for the next 20 years, at least.

It was just after 5pm this evening when Hamida Ali, the leader of the Labour-controlled council, received a letter about “exceptional financial support” from Luke Hall, the local authorities minister, which confirmed the offer and the terms and conditions which will be attached. The deal has the approval of Robert Jenrick, the Secretary of State.

Junior minister Luke Hall: £120m comes with conditions

Ali shared the news with her fellow Labour councillors in a virtual meeting that began at 7pm.

They now have until next Friday, March 12, to decide whether to accept the government’s terms. They really don’t have much choice.

On Monday, March 8, the council cabinet meets to discuss the arrangements, with a full council meeting that evening to set the borough’s budget and Council Tax for 2021-2022.

The government appears intent to punish Croydon, and its Labour politicians, by charging an extra 1 per cent over its usual borrowing rates from the Public Works Loans Board over the 20-year term of the loan – in that time costing the borough’s tax-payers an extra £24million.

Croydon declared itself effectively bankrupt in November, when it had overspent its budget for this financial year by £66million. The pressures of running the borough during the coronavirus pandemic had come at a high cost, and the council had rundown its reserves to dangerously low levels.

As Inside Croydon revealed exclusively last week, that overspend figure has now soared to £96.5million, as the council has failed to put the brakes on and spent a further £31.8million beyond its means in the first three months of 2021.

The government kept the council waiting until after Wednesday’s Budget statement by the Chancellor for a decision on whether it would allow the extra borrowing. The MHCLG has already agreed capitalisation directions arising out of the covid emergency for five other local authorities, including another south London borough, Bexley. Only one of those loans is for more than £10million.

Late notice: council leader Hamida Ali

The government’s deal could see Croydon having to find another £45million-worth of savings in the next financial year – 2021-2022 – but Hall’s letter makes it clear that the MHCLG expects Croydon to follow-through on its “asset disposal plan”, which includes flogging off some of the council’s less-than-shrewd “investments”, such as the Croydon Park Hotel.

It will also expect the council to generate cash from the sale of Brick by Brick properties and sites.

Even with the government deal, the council will be reduced to providing only the bare minimum, legally-required services, while continuing to make staff redundant and closing libraries, recycling centres and other council-owned facilities.

Hall’s letter to Croydon expresses the expectation that the council will continue to “co-operate closely” with the government-imposed improvement panel. Failure to achieve the necessary financial targets or follow the recommendations of Tony McArdle and the improvement panel will, Hall warns, see the management of the borough taken out of the council’s hands and commissioners appointed.

Read more: Council Tax-payers pay for politicians’ game of cat-and-mouse
Read more: 28% – Newman leaves his Council Tax legacy to Croydon
Read more: ‘Not good enough’ chair of scrutiny could yet stay in post

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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email
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6 Responses to Croydon In Crisis: Council handed biggest bail-out ever

  1. I hope Croydon fail to make the financial improvements or follow the recommendations of Tony McArdle – we will then see the management of the borough taken out of the council’s hands and commissioners appointed.

    I and thousands of people in Croydon do not want to Cllr Paul Scott manipulating the planning process in this borough any longer. If Ali doesn’t take action on this, residents will take action in the polls. Scott is killing Labour’s chance of re-election in this borough.

  2. Georgina king says:

    Definitely cut directors pay

    • Jay Beck says:

      Cut directors altogether, all they do is pass the buck on to the different Heads of Department below them on the strategic decisions of the day to day council operations, then concentrate themselves on how they can waste vast sums of our money elsewhere, i just don’t see the point of them, they make absolutely no contribution to the running of the Council. Take Public Realm Director Steve “Billy Big Balls” Iles, he has the worst performing services under him, Highways, Parking and Waste. Waste services are appalling with the Veolia service provider. So how is it addressed? They are awarded a £20 million plus uplift, and at a time when the Council are in a chronic financial mess!! You just couldn’t make it up!!

  3. moyagordon says:

    What a sorry mess. 20 years to pay off a debt that was built up in 6 years. Lessons need to be learnt so that run away councils can’t be allowed to recklessly spend council taxpayers’ money.

  4. Roy Boxall says:

    Absolutely disgusting why do croydon taxpayers have to pay for council mistakes they been doing this for years and getting away with it. Can’t wait to move out of Croydon

  5. Liz clark says:

    We need our green spaces more than ever. The lodge could be used as a public meeting place. Rooms rented out for activities such as clubs for local communities. Youth clubs clubs for the elderley one o’clock clubs. The garden could be used as a community garden
    There is so much more we could use the house and grounds for..
    . Selling off green spaces is wicked and short sighted.

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